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February 2019

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AutoNation head, Mike Jackson, gives his views on Tesla’s new plan to achieve 500,000 deliveries by 2018

For the good or bad, Tesla Motors Inc (NASDAQ:TSLA) plans to accelerate its production target of achieving half a million deliveries by 2018, instead of 2020, has been an eye-opener for many analysts and industry experts. While we already know that analysts have a mixed opinion about the move, let’s take a look what AutoNation, Inc. (NYSE:AN) President, CEO and Chairman, Mike Jackson, thinks about the Build Plan.

Mr. Jackson, head of the largest US auto retailer and possibly rival to Tesla’s direct-sales business model, was recently invited as a guest at CNBC’s “Square Box” to discuss the young electric vehicle (EV) company’s production outlook, being in the automobile industry for several years.

When the executive initially heard about the company’s new outlook, he expressed himself saying that “I was somewhere between the word audacious and preposterous […] wasn’t sure which point to settle on.”  He also notified that Tesla has created a reputation for “missing every launch date by years.”

He rightfully pointed out that if the automaker is actually serious about the guidance, it requires launching its first mass-market vehicle, the Model 3, in July, 2017, about six months ahead of its delivery date of 2017 end. This will be essential to increase the $35,000 vehicle’s production at an extremely huge scale and achieve targets for the upcoming couple of years.

Mr. Jackson highlighted that the company lost two key senior production executives just hours before the earnings release of the first quarter of fiscal year 2016 (1QFY16) in which it made its new production announcement.

Though, the AutoNation leader did agree with the management that their Model 3 will be far more easier to manufacture than its predecessors, the model X specifically, which he described as “unbelievably complex” to build.

 

For the first time in iOS history, a version of the OS has been released with a decrypted kernel

Brought to light by security researchers from MIT Technology Review, it has been revealed that the recently released Developer Beta for iOS 10 Beta features an unencrypted kernel. Due to this, anyone can examine the entire code of the Kernel, which can be considered the heart of the operating system. No previous version of iOS has been released with an unencrypted kernel, final release or beta; so why the change?  

There are both pros and cons for this change but since Apple hasn’t released any statement about this change, security researchers have been left wondering if this was an intentional move by Apple or if someone in Apple messed up?According to security researcher Mathew Solnik, with the code for the kernel being public knowledge, researchers will be able to study it in depth to figure out how it works in order to find out ways to compromise security. Jonathan Levin, a well known author who wrote a book about iOS has said that with the kernel unencrypted, there is no need to go through the arduous task of reverse engineering it which is the first step in finding vulnerabilities. He speculates that “someone inside the company screwed up royally.” 

But you do need to remember that this is Apple we’re talking about. Such glaring mistakes don’t just slip through. On the flip-side, Jonathan Zdziarski echoes this sentiment and proposed that Apple may have wanted more people to research and find vulnerabilities in the kernel before the final release of iOS 10 in order to make it more robust and secure. 

“Opening up iOS for anyone to examine could weaken that market by making it harder for certain groups to hoard knowledge of vulnerabilities,” Zdziarski says.

Considering that this is Apple we’re talking about and with such a major release involved, it’s highly unlikely that this could be a mistake on Apple’s part. Each iOS release goes through numerous levels of review and the fact that the iOS Developer Beta is still live and not pulled lays more credence to the latter theory.

Stifel’s Mark Astrachan expects Procter & Gamble to trade in the range of $84 to $86 over the next 12 months

Procter & Gamble (NYSE:PG) is on track to achieve a sales growth rebound in 2016 after nearly three years, due to its simplification strategy, cost cutting, and spending on marketing. While the stock has grown over 11% so far this year, it is expected to remain in the price range, at least for Stifel, which downgraded the stock on the back of three main reasons. 

Mark Astrachan, analyst at the firm, lowered P&G’s stock rating from Buy to Hold, and cut its price target from $88 to $86, which still represents a potential upside of over 2%. The shares edged out 0.32% and closed the market at $84.28 on Wednesday. 

The analyst sees limited upside to the stock price on the back of three main issues: currency headwinds, moderate estimated input cost inflation, and the on-going geo-political uncertainty. Therefore, he expects the stock to trade in the price range of $84 to $86 over the next 12 months. 

Nevertheless, the investment firm continues expecting 2% growth in organic sales during the fiscal year 2017, with most increase in two-year compounded annual growth rate (CAGR) throughout the period, boosted by improving market share on innovation and reinvestment.  

Mr. Astrachan noted in the report, “Overall, while the company continues to anticipate exiting F2017 with organic sales growth near market growth, currently approximately 3.0 percent, we believe it is more likely to begin in F2018 as P&G benefits from anticipated investment and innovation.” He estimates earnings per share (EPS) of $3.80 for FY17 and $4.01 for FY18, compared to consensus estimates of $3.86 and $4.17, respectively.

Credit Suisse’s Omer Sheikh believes that Disney cannot deliver annual synergies to justify Netflix’s price tag

Since last October, there have been heavy speculations related to a potential acquisition of Netflix, Inc. (NASDAQ:NFLX) by Walt Disney Co (NYSE:DIS). The video streaming company’s shares received some boost from these assumptions.

While the highly unlikely transaction seems possible to analysts like Deutsche Bank’s Bryan Kraft and Bernstein’s Rodd Juenger, others including Brean Capital’s Alan Gould and the billionaire investor Bob Olstein think that Netflix would be like a white elephant for Disney, consuming billion of dollars annually with limited returns on top of its hefty price tag.

Today, Credit Suisse analyst Omer Sheikh published a research note giving his view on the potential merger between the two media behemoths, somewhat agreeing with Mr. Gould and Mr. Olstein. He does not believe that the deal presents any value for Disney, providing two main points:

First, he highlighted that the media industry trends are improving which is moderating the “strategic pressure” to takeover a distributor over the short term.

Second, he believes that “the dilution to EPS/FCF” as well as return at current stock price would be prohibitive.

Regarding the potential dilution of earnings per share and free cash flow, Mr. Sheikh noted, “We calculate that a 70% debt financed transaction at $160 per NFLX share would materially dilute DIS EPS/FCF (-11%/-10%), and modestly dilutive to CFROI®.”

To justify a price tag of $70 billion, Disney would require delivering about $2 billion per year in pre-tax synergies from the deal to cover its capital cost, he added.

The research firm highlighted Disney is close to gaining 90 million “global customer relationship years before its organic strategy kicks off. It has more monetization alternatives for sport rights. Considering these factors, as well as the elimination of SVoD,” Credit Suisse concluded that it will be difficult for the company to deliver $2,000 in annual synergies to justify Netflix’s tag price.

As of 10:17 AM EST, Netflix shares edged up to $131.10 and Disney shares were trading down 0.25% at $108.12.

Gold and foreign exchange may witness lots of volume and trading if Trump wins, Citigroup says

Citigroup Inc. (NYSE:C) warns of gold and commodity volatility ahead as the first presidential debate for 2016 took place on Monday. According to the Bloomberg report, the polls suggest that the Republican candidate Donald Trump may have a 40% chance of winning the elections. Gold has rallied throughout the year as potential rate hike looms in 2016.

The first debate took place on Monday between the two parties and their candidates, where Hilary Clinton represented the Democratic party. The polls jumped higher from 35% after the debate, as the race between the two candidates tightened.

The note by Citigroup said: “Polls have started to tighten ahead of the U.S. presidential election, and Citi has raised the probability of a Trump victory. We expect a Trump win would bring out higher volatility in gold and forex, which in turn should lead to higher volumes in other precious metals.”

Gold bullion rallied 26% in 2016 as it rebounded from a consecutive three-year loss. Due to long standing low interest rates and uncertainty in the financial markets, gold has kept its value in 2016. Several analysts believe that the gold can rise up to $1,900 an ounce. Currently, an ounce price for gold is around $1,337.

Citigroup also said in the note that the investors await a rate hike which the Federal Reserve indicated can be as early as this December. Therefore, the markets would be impacted by the rate hike and cause more uncertainty, which again could be a catalyst for gold bullion.

Morgan Stanley has recently said that the markets are not considering and or believing Trump victory in the elections, which could create a havoc. However, as the polls are getting tighter, the investors and markets seems to adjust that believe on their portfolio and sentiments over the financial markets. Citigroup believes that a Clinton win would relatively have a less impact on the markets.

FBR Capital added Sprint to Alpha Generator list on visibility of long-term growth

Sprint Corp (NYSE:S) is an American telecommunication company which specializes in wireless services. The company ranks among the major Internet carriers globally and is currently the fourth largest among the wireless networks that are operated in the United States. The company holds several subsidiaries such as Boost and Virgin mobile and offers a wide spectrum of services including broadband, text messaging and voice messaging. The headquarters are located in the state of Kansas, United States and it serves more than 58.8 million subscribers currently according to a survey in March this year.

For the past few quarters, the company has been unable to post a positive EPS and this slump in profitability has advocated dramatic cost cuts. It seems that the company is now headed in the right direction as FBR Capital has added the stock in its Alpha Generator List following the company’s plan to opt to low cost network upgrade strategy. Analyst David Dixon, now sees a clear path to long term growth and believes that the company is now closing the gap between itself and competitors.

The company’s capital expenditure guidance is shockingly low and has prompted concerns regarding sustained execution. However, Mr. Dixon is of the view that if the company manages to come true to the challenges its low cost CPE solutions will surely help in leveraging its 2.5 Gigahertz spectrum, which, in turn will help it gain lost ground against rivals. The path to positive Free Cash Flow is also within the realms of possibility given the company manages to stay in line with its capital expenditure guidance.

The analyst believes that Sprint will surely benefit from its low cost strategy and it may very well become one of the fastest data networks in the US. The analyst reaffirmed an Outperform rating and $6 price target. The analyst opinion for Sprint has two Strong Buy, one Buy, 19 Hold, five Underperform and four Sell ratings. The stock has not been traded in the premarket and closed at $3.84 yesterday.

Amazon’s CEO, Jeff Bezos, announced a new Kindle on Twitter

For those individuals who are planning on getting their hands on the Kindle Voyage, it would be a better idea to wait it out just a little bit more, because Amazon.com Inc.’s (NASDAQ: AMZN) CEO, Jeff Bezos, recently announced that the company would be releasing a new Kindle in the next few weeks.

According to Bezos, the ‘top of the line Kindle’ is nearly ready. He also stated that the further details about the new device will be revealed next week.

There are those who speculate that the new device will replace the Kindle Voyage; the device was released back in 2014 initially costing $200, which is quite a lot considering the fact that it is an e-book reader. However, the device is a lot cheaper than it was before.

The Voyage is, without a doubt, lighter and smaller and it comes with unique features like pressure-sensitive pages and adaptive lighting technology, but it does not prove to be a better buy when compared to the Paperwhite. It is possible that the new Kindle will replace Voyage in this regard, but nothing can be said for certain until further details are revealed next week.

On the other hand, there is no denying the fact that it is quite strange for Amazon to make a big announcement this way, as new devices along with their launches are mostly shrouded in mystery. But seeing Bezos, it does not seem that big of a deal, mostly because e-book readers are not highly anticipated gadgets in this day and age.

That being said, Amazon has been highly successful with its Kindles, and it manages to dominate the niche market with its devices, so there is no real reason for the company to tease its target audience by making such an announcement. But then again, there could be more to it than meets the eye.

RBC Capital has a positive stance on Apple’s stock as the manufacturing orders for iPhone7 increased to nearly 80 million

Amit Daryanani, RBC Capital analyst has a positive outlook on Apple Inc. (NASDAQ:AAPL) stock subsequent to a report, which revealed the company’s plan to produce higher-than-expected iPhones this year. The firm maintains a price target of $120 on Apple stock, suggesting a 24.44% upside potential according to its last close of $96.43.

Yesterday, Taiwanese Economic Daily reported that Apple has increased its iPhone7 production targets to 72-78 million. The production target is significantly 10 million ahead of the Street’s expectations of nearly 65 million initial builds.

Talking about a number of production variables that require attention, the analyst further noted, “Given the high degree of negativity around AAPL we think initial indication of flat production (y/y) is a positive data point given investor apprehension that AAPL units could be down mid to high single digits through the iPhone 7 cycle.” For the $534 billion company, Mr. Daryanani expects improved gross profit margins quarter-over-quarter. Moreover, if the market conditions are favorable, the analyst projects better comparable store sales for the iPhone.

Apple is expected to launch three latest flagship smartphones in the second half of this year, including iPhone 7, iPhone 7 plus and iPhone Pro/Premium. The ED report further revealed Foxconn’s (a contract manufacturer of iPhones headquartered in Taiwan) efforts to enhance workforce, in order to meet extensive demand for initial production.

RBC Capital has an Outperform rating on Apple’s stock. Data on Thomson Reuters reveals consensus expectations of $126.25 price target, reflecting 30.92% upside potential on the stock.

Amazon’s latest addition to its Kindle line of e-readers has actively divided the users

Amazon.com Inc. (NASDAQ: AMZN) this week unveiled its latest tablet in the Kindle line this week called the Oasis. Kindle Oasis packs in the features that were indicated in the leaked photo reported just a few days prior to the official launch, and the device costs a whopping $290! That is quite easily that one aspect of the device which has divided opinion as far as the device is concerned.

Hence the question: what does it really contain to cost the money that it costs, and do you really need what it has to offer with the premium that it charges? Let’s dive straight into it, shall we?

Kindle Oasis introduced a design, as indicated in the leaked photos, which features a thinner bezel at one side, and a thick underside bump to go with it. The body is the thinnest for any Kindle yet, weighing in at approximately 131 grams, with the same 6-inch 300 pixels-per-inch display that came with Kindle Voyage. The only difference is that Oasis comes with 60% more LEDs to give it various lighting options for different environments, while another addition is the mandatory leather battery cover, which potentially raises the device’s battery to months of standby time.

The change in display LEDs, a thinner body and the leather battery cover is actually all that Kindle Oasis offers relative to Kindle Voyage. Although the price tells a different story, with the Oasis costing $90 more than Voyage. So do you really need to play the premium for a shiny new cover and a thinner device which is also brighter?

Kindle is an e-reader primarily aiming to provide the users a reading experience closest to that of handling their favorite paperback, jacketed books. While a better battery life certainly sweetens the deal, and the leather cover also lends the device and its user a certain persona and a sophisticated touch, there remains the slight issue of a user doubting that he is coughing up more than what an e-reader should actually cost. Kindle’s competitive pricing is a major reason why it commands a majority of the e-reader market share, and its competitors like Kobo and Nook are barely hanging on.

While the leather cover makes the device look better than it would otherwise would, aesthetics of a Kindle device has never really been the reason why it has dominated the market. Selling a mandatory leather battery cover to increase the price and deal the device a differentiating factor seems like something a competitor should do, to give better competition to the market leader that releases a formidable e-reader after another.

Without any noticeable upgrade when compared to the Kindle Voyage, Oasis could yet face some recoil when it comes to the response from users. If Amazon thinks that by increasing the price and adding a sophisticated leather cover could convert paperback readers, or compel users to upgrade, then it might not be entirely right with this one.